Fiscal Deficit target looks closer on high GST mop-up

The goods and services tax (GST) and savings on expenditure may have saved the day for the government, taking it within kissing distance of the fiscal deficit target of 3.4% of GDP, offsetting shortfall in direct tax collections. GST collections touched their highest since the single levy was launched in July 2017, coming in at Rs 1.07 lakh crore in March, data released by the government on Monday showed. Annual GST collections are seen at Rs 11.77 lakh crore, ahead of the revised estimate of Rs 11.47 lakh crore in the February 1 interim budget. This uptick in GST collections comes even as rates were cut on a number of products during the year.

“Growth in GST could have been much higher if we take the tax cuts into account,” said a top government official. The higher collections will help meet the shortfall in direct taxes. In the revised estimate for FY19, the government had raised the direct tax target to Rs 12 lakh crore from Rs 11.5 lakh crore. As taxes trickle in after last-minute efforts by taxmen on both direct and indirect taxes, North Block officials exuded confidence about meeting the fiscal deficit target of 3.4% of GDP.

The fiscal deficit had exceeded the full year target for FY19 by 34.2% at the end of February, triggering concern that the target may not be met. The government may have also cut some spending to stay within the budgeted number.

Finance minister Arun Jaitley said the jump in GST collections was signalled by an expansion in manufacturing and consumption. “The record collection in March 2019 of the GST touching Rs 1,06,577 crore indicates the expansion in both manufacturing and consumption,” Jaitley tweeted on Monday.

GST COLLECTIONSThe monthly average of GST revenue in FY19 was Rs 98,114 crore, 9.2% higher than that in FY18. The total indirect tax collection target, including customs and central excise duty, of Rs 10.32 lakh crore has been met. GST revenue for the last quarter of FY19 was 14.3% higher on-year, thanks to the last month bump. “Collection during March 2019 has been the highest since introduction of GST,” an official statement said. “Revenue in March 2018 was Rs 92,167 crore and revenue during March 2019 is a growth of 15.6% over the revenue in the same month last year.”

NON-TAX REVENUESDividends from public sector enterprises and savings on expenditure helped meet the fiscal deficit target. Final data will be available some time after tax collections, which come with a lag due to bank transfers, are frozen. The disinvestment target of Rs 80,000 crore has been surpassed by Rs 5,000 crore. Economic affairs secretary Subhash Garg has maintained the government will meet the 3.4% fiscal deficit target. Many state-run companies had declared an interim dividend last month, shoring up government revenues.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.